The RSIB opines that due to the Wayfair decision, the Commission is now authorized to act as the single entity for the administration and collection of sales and use taxes with respect to remote sellers. However, it should be noted that it remains unclear if this jurisdictional expansion of the Commission under Act 5 of the 2018 Second Extraordinary Session was actually triggered by Wayfair. As we mentioned in our previous blog post, Not So Fast: Louisiana State and Local Sales Taxes in a Post-Wayfair World:

“Act 5 does not become applicable unless/until the U.S. Supreme Court rules in the Wayfair case that the South Dakota statute/regime is “constitutional.” Although the Court in Wayfair ruled that there is no longer a “physical presence” nexus test for Commerce Clause purposes, the Court did notrule that South Dakota’s scheme was constitutional. Rather, the Court remanded the case to address whether South Dakota’s regime was constitutional taking into account other issues (such as any other undue burdens upon, or discrimination against, interstate commerce). Thus, as of right now, Act 5 in Louisiana is not yet applicable (and may never be).”

The RSIB also opines that a flat adoption of the Streamlined Sales and Use Tax Agreement was not a requirement found by the Court in Wayfair in order to meet Commerce Clause standards. Some, however, have disagreed with this notion, and the ultimate answer on this issue is currently unclear.

The RSIB provides that the Louisiana Department of Revenue will notbe seeking any retroactive application of the Wayfair decision, and instead will begin enforcing collection from remote sellers for any taxable period beginning on or after January 1, 2019.

The RSIB also notes that the Louisiana Uniform Local Sales Tax Board will issue guidance to local collectors recommending that they also do notseek any retroactive application of the Wayfair decision.

The RSIB reminds remote sellers that those who have voluntarily registered with the Department of Revenue and are currently collecting and remitting sales and use tax using a Form R-1301, Direct Marketer Sales Tax Return, should remain collecting and remitting in such manner until further guidance is issued by the Commission.

The RSIB also reminds taxpayers that the current information reporting requirements in Louisiana are still in effect; thus, remote sellers who are not currently collecting and remitting sales and use taxes must file applicable information reports as required under current law.

The Jones Walker SALT Team will continue to closely follow – and report on – these developments as they occur.

]]>https://www.cookingwithsaltlaw.com/2018/07/jw-salt-heads-to-seata/feed/0https://www.cookingwithsaltlaw.com/2018/07/jw-salt-heads-to-seata/Not So Fast: Louisiana State and Local Sales Taxes in a Post-Wayfair Worldhttp://feeds.lexblog.com/~r/CookingWithSalt/~3/K-j52sjVPLg/
https://www.cookingwithsaltlaw.com/2018/07/not-so-fast-louisiana-state-and-local-sales-taxes-in-a-post-wayfair-world/#respondWed, 11 Jul 2018 17:24:52 +0000https://www.cookingwithsaltlaw.com/?p=2311Continue Reading ]]>As word spread about the Supreme Court’s opinion in South Dakota v. Wayfair, Inc., Dkt. No. 17-494, 485 U.S. (June 21, 2018), tax administrators around the country popped open bottles of champagne and began toasting the end of the “physical presence” substantial nexus standard. The sounds of celebration were, at least initially, particularly deafening in Louisiana, with its sixty-three (63) autonomous parish taxing jurisdictions that levy, administer and collect local sales and use tax on behalf of numerous cities, towns, districts and other local jurisdictions. Remote sellers might have considered downing a drink or two to drown their sorrows at the thought of potentially having to navigate the complex systems of state and local sales taxes in Louisiana.

As tax administrators continued to read the Wayfair opinion, however, a sobering reality began to set in that, at least in the short term, Louisiana’s various taxing jurisdictions are in no better position to force remote sellers to collect and remit state and local sales taxes than they were before the Wayfair decision (and perhaps even a worse one).

The New Constitutional “Statutory Nexus” Test Under Wayfair

In the post-Wayfair world, gone is the “physical presence” rule of Quill and Bellas Hess for purposes of determining whether a state can force a remote seller with no physical presence in a state or a locality to collect and remit sales taxes. In its place, the Court has re-inserted a more amorphous substantial nexus test. According to the Court, in the absence of Quill and Bellas Hess, the first prong of the Complete Auto test simply asks whether the tax applies to an activity with a “substantial nexus” with the taxing jurisdiction, with such nexus established when the taxpayer or vendor “avails itself of the substantial privilege of carrying on business in that jurisdiction.” The Court concluded that nexus was sufficient in the Wayfair case based on both the “economic and virtual contacts” (an “extensive virtual presence”) the remote seller had with the taxing jurisdiction, and the fact that South Dakota’s applicable nexus statute only applies to sellers that deliver more than $100,000 of goods or services into the taxing jurisdiction or engage in 200 or more separate transactions for the delivery of goods and services into the taxing jurisdiction on an annual basis.

Importantly, however, especially for Louisiana, the Court in Wayfair also explained that complex state and local sales tax systems could have the effect of unduly burdening or discriminating against interstate commerce, notwithstanding the issue of nexus. In eschewing physical presence as a gatekeeper nexus text, the Court was careful to remind everyone that other Commerce Clause principles can invalidate a state or locality’s sales tax scheme – specifically, taxing jurisdictions may not impose undue burdens on interstate commerce and may not discriminate against interstate commerce.

In remanding the Wayfair case for further proceedings, the Court questioned whether some other principle in the Court’s Commerce Clause doctrine that had not yet been litigated or briefed might invalidate the South Dakota law. The Court, however, specifically noted that South Dakota’s tax system includes several “features” that appear designed to prevent discrimination against or undue burdens upon interstate commerce:

First, the Act applies a safe harbor to those who transact only limited business in South Dakota. Second, the Act insures that no obligation to remit the sales tax maybe applied retroactively. S.D. 106, §5. Third, South Dakota is one of more than 20 States that have adopted the Streamlined Sales and Use Tax Agreement. This system standardizes taxes to produce administrative and compliance costs: it requires a single, state level tax administration, uniform definitions of products and services, simplified tax rate structures, and other uniform rules. It also provides sellers access to sales tax administration software paid for by the State.

Wayfair at p. 23.

The Court, therefore, clearly provided a road map for designing state and local sales tax systems that would appear not to tread on the Commerce Clause.

As explained below, Louisiana’s state and local sales tax systems have none of these features. In fact, Louisiana’s combined state and local tax systems could be considered the prime example of the complex state and local tax systems that the Court warned would create an undue burden upon and discriminate against interstate commerce.

What Does Wayfair Mean for Louisiana’s State and Local Sales Tax Systems and Retailers Selling to Louisiana Consumers?

Applying Wayfair to Louisiana’s complex state and local sales tax systems leaves little doubt that Louisiana’s state and local tax systems are lacking on all fronts.

Question: Do Louisiana’s state and local sales tax systems have minimum annualized thresholds of sales amounts and/or number of sales?

Answer: At the moment, they do not.

Currently, neither Louisiana’s state sales tax system nor any of the 63 parish sales tax systems in Louisiana has applicable safe harbor factor presence nexus thresholds (i.e., $100,000 of sales or 200 separate transactions). In Act 5 of the Second Extraordinary Session of 2018, the Louisiana legislature enacted a law with an expanded definition of “dealer” to include:

Any person who sells for delivery into Louisiana tangible personal property, products transferred electronically, or services, and who does not have a physical presence in Louisiana, if during the previous or current calendar year either of the following criteria was met: …

The person sold for delivery into Louisiana tangible personal property, products transferred electronically, or services in two hundred or more separate transactions.

Act 5 was an attempt by the legislature to add, on a prospective basis, a new definition of “dealer” for Louisiana statutory nexus purposes to make Louisiana’s statutory nexus regime on par with the South Dakota statutory economic nexus regime at issue in the Wayfair case. However, the new “dealer” definition in Act 5 does not become applicable unless/until the U.S. Supreme Court rules in the Wayfair case that the South Dakota statute/regime is “constitutional.” Although the Court in Wayfair ruled that there is no longer a “physical presence” nexus test for Commerce Clause purposes, the Court did notrule that South Dakota’s scheme was constitutional. Rather, the Court remanded the case to address whether South Dakota’s regime was constitutional taking into account other issues (such as any other undue burdens upon, or discrimination against, interstate commerce). Thus, as of right now, Act 5 in Louisiana is not yet applicable (and may never be). Of course, as was recently attempted by some members of the legislature in SB 1 of the Third Extraordinary Session of 2018 (which failed to pass), the legislature may in the future attempt to change the “applicable” date of Act 5, so as to make the Act applicable as of a certain date rather than being contingent on some outcome of the Wayfair case. Any such change would likely be prospective only.

Question: Do Louisiana’s state and local sales tax systems provide any assurance that the recent decision of the Supreme Court in Wayfair will not be applied retroactively?

Answer: They do not.

Currently, neither Louisiana’s state sales tax system nor any of the 63 parish sales tax systems in Louisiana provides any assurance that the recent decision of the Supreme Court in Wayfair will not be applied retroactively to force remote sellers to collect and remit state-level sales taxes local-level sales taxes for periods prior to the date of the decision. As noted above, Act 5 attempted to apply the “South Dakota” style statutory economic nexus regime to Louisiana on a prospective basis.” However, Act 5 is not applicable (and may never be) in its current form. This prospective only language in Act 5 also only applies to the new, additional definition of “dealer” and does not apply to the other relatively broad definitions of “dealer” that are already found in the Louisiana state and local sales tax statutes and ordinances.

Question: Has the State of Louisiana or any local taxing jurisdiction in Louisiana adopted the Streamlined Sale and Use Tax Agreement (SSUTA)?

Answer: They have not.

Currently, neither Louisiana’s state sales tax system nor any of the 63 parish sales tax systems in Louisiana has adopted or participated in the Streamlined Sales and Use Tax Agreement. Furthermore, currently, neither Louisiana’s state sales tax system nor any of the 63 parish sales tax systems in Louisiana has any of the other positive features noted by the Court in Wayfair:

They have not standardized all state and local sales taxes or even all local sales taxes to reduce administrative and compliance burdens and costs on vendors;

They have not required a single, state-level tax administration scheme for all Louisiana state and local sales taxes or even among all local sales taxes;

They have not provided uniform definitions of products and services that are subject to, or excluded or exempt from, all Louisiana state and local sales taxes or even among all local sales taxes;

They have not provided simplified rate structures for all Louisiana state and local sales taxes or even among local sales taxes;

They have not provided other uniform rules applicable to all Louisiana state sales taxes or even to all local sales taxes;

They have not provided a simplified, centralized, combined audit process for all Louisiana state and local sales taxes or even for all local sales taxes; and

They have not provided access to tax administration software paid for by the tax administrator(s) (and related immunity from audit liability for those sellers who use such software).

Failure to incorporate any such features in Louisiana’s state and local sales tax systems places undue burdens upon and discriminates against interstate commerce.

In addition, currently, Louisiana’s state sales tax system and the 63 parish sales tax systems in Louisiana (by themselves and in combination with one another) also contain multiple onerous features that individually and collectively impose undue burdens on vendors that are engaged in interstate commerce and that are asked to collect and remit Louisiana state and local sales taxes on behalf of the various Louisiana state and parish sales/use tax collectors. Such onerous features include, but are not limited to:

Over fifty-five (55) separate, autonomous parish sales/use tax collectors (a few parishes have agreed to use the same collector);

A lack of uniformity between the state and local sales and use tax bases, and even among the local sales and use tax bases;

The disparate treatment of exemptions and exclusions among parish collectors and between the state and parish collectors;

A wide array of tax rates among the local taxing jurisdictions on the same transactions that vary based on highly granular geographic boundaries that often are not readily available to vendors;

The disparate interpretations and applications of the same statutes among parish collectors and between the state and parish collectors on the same transactions from the same vendor, even in situations where there is supposed to be uniformity;

The disparate guidance or a lack of sufficient guidance among parish collectors and between the state and parish collectors as to the taxability or nontaxability of transactions, goods, and services;

State sales tax exemptions that are not applicable at the parish level;

Parish-level exemptions that are not applicable for purposes of the state sales tax;

Optional parish-level exemptions and exclusions;

Recent exemption and exclusion “haircuts” applicable only to a portion of the state sales tax, but not parish-level sales taxes;

The disparate application of tax procedures and interpretations of tax procedures among parish collectors and between the state and parish collectors to the same taxpayer;

An increased number of audits from individual parish-level collectors; and

The potential of having to file annually over 750 different state and parish sales tax returns throughout Louisiana (with numerous disparate calculations made on each return).

These onerous features, among others, create one of the most, if not the most, complex state and local sales tax systems in the country that impose undue burdens on interstate commerce for remote sellers.

Louisiana’s Lack of Centralized Collection and Uniformity… and Steps Being Taken to Change

It is in the area of centralized collection and uniformity that Louisiana is lacking perhaps more so than any other state. The Louisiana Department of Revenue administers and collects state level sales taxes. Sixty-three (63) separate Louisiana parishes levy, collect, administer, and audit their own local-level sales taxes (with a only few a parishes agreeing to use the same collector). Louisiana’s various state and local tax administrators have long been aware that single, centralized tax administration would likely be necessary in order for Louisiana’s attempts to impose sales tax collection requirements on remote sellers to pass constitutional muster. In 2017, the Louisiana legislature passed a law for the establishment of the Louisiana Sales and Use Tax Commission for Remote Sellers (the “Commission”). The original raison d’être of the Commission was to serve as a single entity in Louisiana to require remote sellers to collect and remit to the Commission sales taxes on remote sales sourced to Louisiana taxing jurisdictions if Congress passed a law authorizing states and localities to require remote sellers to collect sales tax. With a ruling in Wayfair pending, Act 5 (2018 2nd Ex. Sess.) also expanded the available triggering events that would allow the Commission to serve as the single tax collector on remote sales, so as to also include a “final ruling by the United States Supreme Court” that authorizes states and localities to require remote sellers to collect sales tax. With Act 5, the legislature was attempting to position the state and the local taxing jurisdictions in Louisiana to begin reaping the benefit of additional tax revenue should the Court rule that South Dakota’s scheme is constitutional. However, as noted above, Act 5 is not yet “applicable.” As a result, the Commission is not technically provided such authority to serve as the single tax collector on remote sales.

Notwithstanding the foregoing, and obviously motivated by the Supreme Court’s decision in Wayfair, the Commission held its first meeting on June 29, 2018. To its credit, the Commission will forge ahead with its planning despite the fact that the applicability of Act 5 remains in limbo. The Commission has set as its target date January 1, 2019 to have a mechanism in place for the centralized collection of Louisiana state and local sales taxes from remote sellers. The second meeting of the Commission is scheduled for today, July 11, 2018.

Are Remote Sellers at Risk for Prior Sales Tax Periods?

While the Wayfair case was pending with the Supreme Court, a handful of parish sales tax administrators stated that once Wayfair overruled Quill and Bellas Hess, the local jurisdictions would retroactively audit and assess their own collection agents – remote sellers. Although the Supreme Court’s ruling in Wayfair did not expressly state that its holding is prospective only, the Court’s opinion expressed in multiple sections the Court’s disapproval of any retroactive application of the Wayfair decision, and it would certainly support an argument by remote sellers that such retroactive imposition of state or local sales tax collection obligations on remote sellers would impose an undue burden upon and/or discriminate against interstate commerce.

What Are Remote Sellers to Do Today?

Considering the language of Wayfair, the fact that Act 5 is not applicable, the fact that the Commission still has much work to do, and the lack of current guidance from Louisiana state and local tax administrators, many remote sellers are understandably confused about their state and local sales tax collection responsibilities in Louisiana today.

The first step in this analysis is for remote sellers to separately analyze existing Louisiana statutes, keeping in mind that the Act 5 provisions providing factor presence economic nexus thresholds are not applicable, to determine if a statutorytax collection requirement exists, and if so, in what jurisdictions.

The statutory nexus requirements are generally found in Louisiana’s definition of a “dealer” in La. R.S. 47:301(4). For example, La. R.S. 47:301(4)(l) provides that a “dealer” includes:

Every person who engages in regular or systematic solicitation of an consumer market in the taxing jurisdiction by the distribution of catalogs, periodicals, advertising fliers, or other advertising, or by means of print, radio or television media, by mail, telegraphy, telephone, computer data base, cable optic microwave, or other communication system.

This definition, however, should be applied to activities in not only the State, but also separately in each local taxing jurisdiction within the State. In other words, regular, systematic solicitation of a market in one parish does not make a remote seller a “dealer” in other parishes. Furthermore, it is highly questionable whether merely maintaining a website where goods can be ordered, without more, rises to the level of “regular or systematic solicitation of a consumer market in the taxing jurisdiction.”

In addition, remote sellers should remain cognizant of the additional statutory definitions of “dealer” in La. R.S. 47:302(V), including those relating to concepts of “click-through” nexus, “affiliate” nexus, “IP” nexus, and “related party” nexus.

If a remote seller determines that it is a statutory “dealer” in a particular taxing jurisdiction, it must then turn its analysis to the constitutionallimitations of undue burden, discrimination, and substantial nexus (as discussed above).

Louisiana’s state and local tax administrators would certainly welcome any voluntary collection and remittance with open arms for those sellers inclined to take on that burden. The direct marketer return (“DMR”) provisions in La. R.S. 47:302(K) are another option for those sellers that qualify. In fact, according to Act 5, were it applicable, remote sellers would be required to collect and remit sales taxes using the direct marketer return until the Commission is provided the authority to serve as the single tax collector on remote sales (by way of Congressional action or a ruling of the U.S. Supreme Court).

Wayfair has undoubtedly provided various states with an additional opportunity to require remote sellers to collect and remit sales tax. The Supreme Court’s decision, however, similarly leaves no doubt that Louisiana’s complex state and local sales tax systems are presently lacking those features that would prevent undue burdens upon, or discrimination against, interstate commerce. It will be very interesting to watch the efforts of state and local officials over the next several months to bring Louisiana’s sales tax systems within the constitutional parameters espoused by the Court in Wayfair.

The Jones Walker State and Local Tax Team will, of course, be monitoring closely.

]]>https://www.cookingwithsaltlaw.com/2018/07/not-so-fast-louisiana-state-and-local-sales-taxes-in-a-post-wayfair-world/feed/0https://www.cookingwithsaltlaw.com/2018/07/not-so-fast-louisiana-state-and-local-sales-taxes-in-a-post-wayfair-world/The Taxman Cometh: Mississippi Sales and Use Taxes in a Post-Wayfair Worldhttp://feeds.lexblog.com/~r/CookingWithSalt/~3/psBh2A6XeTM/
https://www.cookingwithsaltlaw.com/2018/07/the-taxman-cometh-mississippi-sales-and-use-taxes-in-a-post-wayfair-world/#respondTue, 10 Jul 2018 23:37:43 +0000https://www.cookingwithsaltlaw.com/?p=2309Continue Reading ]]>In December 2017, the Mississippi Department of Revenue finalized a new sales and use tax regulation addressing remote sellers and establishing a $250,000 bright-line nexus standard. The department began that process in January 2017 by issuing a proposed regulation and refined it following a public hearing held in February. The regulation positioned the state to take advantage of any repeal of Quill’s physical presence test, but the department stated it would not enforce the new rule until the Supreme Court took that step. Now that Quill’s physical presence rule has been invalidated in Wayfair, taxpayers should expect the department to move forward with these remote-use tax collection efforts. The following information should help summarize Mississippi’s current rules and identify several important details and questions that have yet to be answered.

Statutory Background

Mississippi law [Section 27-67-4(2)(e)] has long required remote sellers to collect use tax if they have nexus with the state by “purposefully or systematically exploiting the consumer market provided by this state.” This could be accomplished “by any media-assisted, media-facilitated or media-solicited means, including, but not limited to, direct mail advertising, unsolicited distribution of catalogues, computer-assisted shopping, television, radio or other electronic media, or magazine or newspaper advertisements or other media.” This collection obligation is contained within the use tax code, not the sales tax code as may be the case in some other states.

Regulatory Bright-Line Rule

The final regulation specifies that sellers have a “substantial economic presence” if their sales into the state exceed $250,000 for the prior 12 months. The original proposed regulation would have based the sales threshold on the prior calendar year, so this change means sellers should track Mississippi transactions on a rolling, monthly basis if they are not otherwise registered. Unlike other states, Mississippi does not specify any minimum number of transactions to create nexus, and Department of Revenue officials have stated informally that a single transaction may meet the requirement when coupled with the other “market exploitation” criteria discussed below.

The regulation is somewhat unclear as to how the registration and collection trigger works for a seller that has not met the sales threshold but suddenly has a large transaction or series of transactions in one reporting period that puts it over the limit. Would that seller be required to register and collect beginning the following month or in the same month in which it crossed that threshold? Practical considerations suggest the collection obligation should begin with the next tax period, but the regulation is unclear on this point and could require an unregistered company to monitor and track its Mississippi sales in real time and perhaps begin collecting on transactions in the middle of a reporting period.

Both the original and final regulations were written in a manner that suggests the registration requirement could be an on-again, off-again determination that might allow a seller to de-register if it subsequently falls below the minimum sales threshold. Regardless, a registered seller must continue to collect and remit unless and until it formally revokes that registration.

For anyone considering simply not remitting tax if they fall back below the threshold, know that collecting sales or use tax without remitting it to the state is a very bad idea. In Mississippi, keeping those trust fund monies carries a 300 percent civil penalty plus potential criminal liability. The department recently issued a new regulation on that and other sales and use tax penalties, but suffice it to say they are very serious about enforcing that rule.

“Purposefully or Systematically” Exploiting the Mississippi Market

The final regulation provided a number of specific examples the Department of Revenue considered to meet the “purposefully or systematically” requirements:

Television or radio advertising on a Mississippi station

Telemarketing to Mississippi customers

Advertising on any type of billboard, wallscape, bus bench, interior and exterior of a bus, or other signage located in Mississippi

Advertising in Mississippi newspapers, magazines, or other print media

E-mails, texts, tweets, and any form of messaging directed to a Mississippi customer

Advertising to Mississippi customers through applications (“apps”) or other electronic means on customers’ phones or other devices

Direct mail marketing to Mississippi customers

Several of these factors seem very straightforward and logical, but the e-commerce examples leave some practical questions unanswered. Most significant might be the question of what constitutes an activity “directed toward Mississippi customers” or the Mississippi market in particular. If a company advertises generally through social media or other electronic means, but not toward Mississippi customers in particular, will that meet the requirements? What about global e-mail blasts that happen to include Mississippi residents in the otherwise nongeographic-specific population? Does the typical third-party e-mail database provide the user with that level of location-specific information? How might a seller’s use of third-party marketers impact its nexus determination or liability?

These are all legitimate and practical questions that presumably must be answered over time, hopefully through additional guidance rather than on an ad hoc basis through audits and litigation. Many of these questions are likely to implicate broader personal jurisdictional concerns, testing both the state’s long-arm statute and due process limitations.

Retroactivity

The effective date of the final regulation was December 1, 2017, and the rule states that it “applies to all transactions occurring on or after” that date. The rule was not conditioned on a repeal of Quill as some states’ statutes have provided, so the regulation would appear to have potential retroactive application back to the effective date. What is not clear is whether the 12-month testing period began on December 1, 2017, or the registration requirement began on that date based on the testing period reaching back to 2016. We expect the Department of Revenue to adopt the latter interpretation on the expectation that sellers possess sufficient historic sales data to make that determination.

The original proposed regulation provided that sellers who had not registered by a certain date would be assessed retroactively without the benefit of any statute of limitations, but those that voluntarily registered by a specific date would be subject to the rule prospectively only. This provision was excluded from the final rule, but we hope to receive additional guidance and perhaps a similar transition policy from the department soon.

Other Wayfair Benefits and Burdens Considerations

The Wayfair majority noted that remote sales and use tax collection laws still could be challenged under several other well-established constitutional tests, even after removing the physical presence nexus requirement. In examining the South Dakota law, the Supreme Court seemed comfortable that it contained several features that might protect that particular tax scheme from many of these challenges, and many states have begun conforming their laws to the South Dakota template. Mississippi’s regulation contains some—but not all—of South Dakota’s safeguards highlighted by the Court, so it is uncertain whether the courts will look as favorably on our scheme if it were challenged.

Both South Dakota’s and Mississippi’s laws contain minimum sales thresholds, but only South Dakota’s sets a minimum number of transactions to protect against a small number of large transactions creating nexus. By requiring a pattern of conduct directed toward the state, Mississippi’s additional nexus element that a seller have “purposefully and systematically” targeted the local market may or may not suffice for South Dakota’s more quantifiable minimum-transactions standard.

While South Dakota’s law applied purely prospectively, Mississippi’s regulation appears to apply retroactivity to transactions occurring on or after December 1, 2017. This limited retroactivity may be viewed more favorably than some other states that threaten full lookback, but the courts nonetheless may question any attempt to assess taxpayers for that interim period prior to the Wayfair ruling.

Unlike South Dakota, Mississippi is not a member of the Streamlined Sales and Use Tax Agreement, which could raise questions regarding uniformity with other states under a Commerce Clause benefits and burdens test. Many other states with decentralized, complex, and inconsistent local sales tax regimes likely have extensive exposure on this point (e.g., Louisiana), but Mississippi’s system is centrally administered by the Department of Revenue even for those few jurisdictions having limited local sales tax surcharges.

Income and Franchise Tax

For the past several years, the department has repeatedly but unsuccessfully attempted to pass income tax economic nexus and market sourcing legislation. In light of Wayfair and its liberalized nexus requirements, taxpayers should closely monitor the upcoming legislative session for additional developments in this area. As more remote sellers begin registering and collecting for sales and use taxes, we expect the state to renew its efforts to expand those filing obligations to income and franchise taxes. Depending on the form of such legislation, a new income or franchise tax nexus standard could extend well beyond remote sellers and pose risks even to upstream suppliers and vendors selling indirectly into Mississippi through common marketplace platforms.

It is July in South Louisiana and it is hot and muggy. But that did not stop last weekend’s crawfish boil. Lately, I have become weary of reading about Wayfair, Kraft, repatriation, BEAT, FDII, GILTI, retroactivity, the slow erosion of the Chevron doctrine, and all of the other hot topics boiling in our SALT world.

To escape the relentless reading, my family hosted a few of our son’s friends for a traditional crawfish boil. Many would question this decision because we are late in the crawfish season and the heat and humidity are oppressive. Forging ahead, however, we enjoyed the successful crawfish boil and highly competitive games of beer pong and water basketball. All in all, a great Saturday afternoon in New Orleans!

Space (and probably protected intellectual property rights) does not allow me to publish the entire recipe for the pots of mudbugs and other fixings we enjoyed. But I will share my favorite part of the recipe we used to conjure up the crawfish concoction. The recipe was broken into detailed steps. At the beginning of each step, the creator of the recipe reminded the user of the recipe the importance of cold beer to the process. No, everyone knows you don’t put beer in the crawfish boil. Instead, an ice cold beer at the beginning of each step is a great refresher, but also chills any anxiety for messing up the preceding step in the recipe. I think you get the picture.

It is now the middle of the week and the Jones Walker SALT Team has returned their sights to the pressing SALT topics of the day. Writing this story, however, makes me smile thinking about the mudbugs (and cold beverages) that were consumed on a hot and sultry South Louisiana Saturday evening. Come on down, ya’ll, and we will boil some mudbugs!

Remember, everything is better with a little SALT. Enjoy your week!

]]>https://www.cookingwithsaltlaw.com/2018/07/when-things-get-hot-put-the-bugs-in-the-pot/feed/0https://www.cookingwithsaltlaw.com/2018/07/when-things-get-hot-put-the-bugs-in-the-pot/Louisiana Department of Revenue Issues New “Taxable Rate” Chart to Explain State Sales Tax Changes Following Enactment of Recent Tax Revenue Billhttp://feeds.lexblog.com/~r/CookingWithSalt/~3/YBUtL_k2TN8/
https://www.cookingwithsaltlaw.com/2018/06/louisiana-department-of-revenue-issues-new-taxable-rate-chart-to-explain-state-sales-tax-changes-following-enactment-of-recent-tax-revenue-bill/#respondWed, 27 Jun 2018 18:04:32 +0000https://www.cookingwithsaltlaw.com/?p=2284Continue Reading ]]>The Louisiana Department of Revenue has now issued a revised “Taxable Rate” chart (Form R-1002) to provide the Department’s understanding of the new Louisiana state-level sales/use/lease tax rates following the Louisiana legislature’s enactment of the sales tax revenue measure Act 1 (HB 10) in the recently-concluded third special session of the legislature, effective July 1, 2018.

A copy of the Department’s new 21-page “Taxable Rate” chart can be found here:

CAUTION: Taxpayers should be mindful that the rates noted in the new “Taxable Rate” chart represent the Department’s interpretationof the applicable rate looking at each specific exemption or exclusion separately and in a vacuum, without taking into account the potential availability of various overlapping exemptions and exclusions that may be applicable to the same type of product, service, or transaction. Also, as this chart is very new, the chart has not yet been exhaustively reviewed by practitioners and business and industry groups to determine/confirm accuracy.

These state-tax rate changes are the direct result of the highly contentious sales tax revenue measure (Act 1) that was finally agreed upon among the Louisiana legislators late last week following three special legislative sessions in 2018 alone. Act 1 was enacted to address and offset the looming “fiscal cliff” revenue shortfall that was going to take effect in Louisiana on July 1, 2018. Act 1 generates the revenue by continuing the imposition of 0.45% of the expiring 1% “clean penny” state sales tax and also imposing a temporary suspension/repeal of the availability of certain exemptions and exclusions toall 4.45%of the state sales tax as of July 1, 2018. It should also be noted that business utilities will be taxed at a lower state sales tax rate of 2% during this time period. These new changes are to be effective for 7 years and will sunset on June 30, 2025.

The state-level sales tax revenues approximated to be generated from Act 1 (per the enrolled bill’s fiscal note) are: $466 mil for the 2018-2019 fiscal year, and $502 mil for each of the 2019-2020, 2020-2021, 2021-2022, and 2022-2023 fiscal years (total of $2.474 billion over the first five years).

JW SALT partners Jay Adams and John Fletcher are attending the IPT Annual Conference in Vancouver. Jay is presenting “What the ‘L’ Local Taxes?” about the differences between state and local taxing jurisdictions and uniformity issues. This is highly relevant in the wake of the recent Wayfair decision. Please contact Jay for more information on this presentation.

]]>https://www.cookingwithsaltlaw.com/2018/06/jw-salt-partners-head-to-vancouver-for-the-ipt-annual-conference/feed/0https://www.cookingwithsaltlaw.com/2018/06/jw-salt-partners-head-to-vancouver-for-the-ipt-annual-conference/Jay Adams included in New Orleans CityBusiness Leadership in Lawhttp://feeds.lexblog.com/~r/CookingWithSalt/~3/8P6lG821O2Y/
https://www.cookingwithsaltlaw.com/2018/05/jay-adams-included-in-new-orleans-citybusiness-leadership-in-law-honorees/#respondWed, 16 May 2018 16:13:28 +0000https://www.cookingwithsaltlaw.com/?p=2259Continue Reading ]]>New Orleans CityBusiness has chosen its 2018 Leadership in Law class, recognizing area professionals in the field of law for their career and community accomplishments. Our own Jay Adams was honored at the reception at the New Orleans Museum of Art. Congratulations, Jay!
]]>https://www.cookingwithsaltlaw.com/2018/05/jay-adams-included-in-new-orleans-citybusiness-leadership-in-law-honorees/feed/0https://www.cookingwithsaltlaw.com/2018/05/jay-adams-included-in-new-orleans-citybusiness-leadership-in-law-honorees/Louisiana Governor Issues Call for Second Special Session of 2018 to Address Fiscal Cliffhttp://feeds.lexblog.com/~r/CookingWithSalt/~3/X11aRWwbVUQ/
https://www.cookingwithsaltlaw.com/2018/05/louisiana-governor-issues-call-for-second-special-session-of-2018-to-address-fiscal-cliff/#respondTue, 15 May 2018 17:44:55 +0000https://www.cookingwithsaltlaw.com/?p=2254Continue Reading ]]>Louisiana Governor John Bel Edwards (D) has now issued his anticipated call for a second special legislative session in 2018 (from May 22nd to June 4th). This 14-day special session is meant to address a stated $648 million budget shortfall, commonly known as the “fiscal cliff.” This will be the sixth special session called since January of 2016.

According to the House Fiscal Office, $1.4 billion in state revenue is set to expire on June 30, 2018. This “fiscal cliff” in the budget results from the scheduled roll-off of incoming revenue from the additional 1% “clean penny” state-level sales tax, as well as the sunset of several temporary haircuts to various exemptions and credits. These measures, which were put in place during the 2015 and 2016 legislative sessions, were considered “temporary” while the legislature worked toward longer-term taxing and spending reform. The Governor has proposed maintaining a portion of that revenue, resulting in a $400 million “net tax cut” for the people of Louisiana.

The first 2018 special session called by the Governor in February (the fifth in three years) was also an attempt to address this upcoming revenue roll-off; however, no significant tax measures were passed by the legislature at that time.

If no new revenue is generated by the legislature in the upcoming special session, then the legislature will be required to balance the fiscal year budget and related “fiscal cliff” solely with budget cuts – largely to the areas of higher education and health care.

The Governor’s new call allows the legislature to consider, among other things, the following items:

Adjustments to brackets for state income tax

Adjustments to state sales tax rates, exclusions, and exemptions

Sales taxation of sales of services

Amendment to the definition of “dealer” for sales tax purposes

Adjustments to various tax incentives (credits, rebates, deductions)

Adjustments to individual income tax deductions

Potential adjustments regarding depreciation and expensing of property for purposes of state income tax (likely as a result of recent federal tax reform measures)

As previously noted, 2019 is a gubernatorial election year in Louisiana. Therefore, budget issues, tax reform, and the raising of taxes will surely continue to be infused with a heavy dose of politics from all sides.

The Jones Walker SALT Team will continue to closely follow – and report on – these legislative developments as they occur. The Louisiana and multistate business community should follow the upcoming second special session carefully and be prepared to act with regard to any new legislation proposed by the legislature.